Climate Value-at-Risk - MSCI

1 value -at-RiskPOWERING BETTER INVESTMENT DECISIONS FOR A BETTER 3 California Clean Energy Act of 2015US solar installation companies saw their revenues soar between 2013 and 2017.[1]India electric vehiclesAccording to government plans, every car sold in India from 2030 will be electric.[3]Australia Wildfires 2019 Insurers have received claims worth of $ million as of January 8, and they expect the number will grow significantly.[4]Massachusetts tidal floodingSince 2005, the local real estate market has collectively lost about $273 million of coastal property value due to flooding from sea level rise.

2 [2]a key risk for institutional investorsClimate change MSCI ESG Research has worked with institutional investors for more than 20 years to enable them to incorporate Climate change considerations in their investment process by providing an extensive view of Climate change risks and opportunities across multiple dimensions: emissions data , fossil fuel exposure, and clean technology exposure. Our Climate change solutions are designed to support investors seeking to achieve a range of objectives, including measuring and reporting on Climate risk exposure, implementing low carbon and fossil fuel-free strategies, and factoring Climate change research into their risk management change may pose a systemic risk to the financial sector, whilst also producing new investment opportunities.

3 Managing these risks and capturing new opportunities can be crucial to protecting investment and optimizing performance while at the same time reaching sustainability financial impactsFocus onclimate change[1] [2] [3] [4] Source: Climate Value-at-Risk ( Climate VaR) is designed to provide a forward-looking and return-based valuation assessment to measure Climate related risks and opportunities in an investment portfolio. The fully quantitative model offers deep insights into how Climate change could affect company managersActionable insights to evaluate Climate -related risks and opportunities.

4 Identify potential alpha factors in low carbon technology to identify optimal low carbon investment projects within a loan book or credit portfolio. Access our quantitative model to help establish a process to protect credit portfolios and establish a disclosure ownersIdentification of long-term, Climate -related impacts for asset allocation, external manager evaluation and regulatory companiesDeep outlooks into the future physical impacts of Climate change and how these changes could affect insurance analysis on Climate risks and opportunitiesSystematic tools for disclosureAutomated.

5 Streamlined report creationHow Climate VaR can help you to prepare your institutionClimate value -at-RiskMSCI ESG Research 5 Companies are affected by Climate change in different ways. Extreme weather could damage assets at a company facility or the introduction of new Climate change policies could require technological change. Both effects have in common their ultimate influence on a company s balance sheet. By calculating the financial risks from Climate change per security and per scenario, MSCI ESG Research provides a framework that is designed to help investors identify and understand these risks and take necessary action for portfolio performance optimization, risk management and regulatory reporting value -at-RiskModeling approachImpact modelingCost / profit calculationSecurity valuationPortfolio aggregationThe G20 Financial Stability Board s Task Force on Climate -related Financial Disclosures (TCFD)

6 Released recommendations in June 2017, which highlighted the importance of using scenario analysis to assess Climate change related impacts within the financial calls for the assessment of both the risk and opportunity side of transition and physical Climate change impacts, and creates a reporting framework that allows institutions to prepare themselves for upcoming alignmentYour tool to uncoverclimate risks and opportunities6 Transition risks and opportunitiesThe policy scenarios aggregate future policy costs based on an end of the century time horizon.

7 By overlaying Climate policy outlooks and future emission reduction price estimates onto company data , MSCI ESG Research s model provides insights into how current and forthcoming Climate policies may affect companies. With the expansion of MSCI ESG Research s new Scope 3 emissions estimation data , the model now includes the integration of policy risk from electricity use (scope 2) and from value chain GHG emissions (Scope 3), alongside policy risk from direct GHG emissions (Scope 1). In this way, the Climate VaR framework is designed to help investors to understand the potential Climate -related downside risk and/or upside opportunity in their investment technology scenarios identify current green revenues as well as the low carbon patents held by companies.

8 Calculate the relative quality score of each patent over time and forecast green revenues and profits of corporations based on their low carbon innovative ESG Research s Climate VaR financial metric helps investors to better assess potential future costs and/or profits relating to their portfolio s exposure to future Climate change impacts. MSCI ESG Research supports clients when they want to understand company and portfolio wide risk exposure, and what that might mean towards the current valuation of security holdings.

9 Climate VaR provides a stressed market valuation of a security in relation to aggregated transition and physical cost and profit projections until the end of the ESG Research s Climate change risk and opportunity calculations cover more than 10,000 companies, assessing all of their associated equities and corporate bonds as part of the risks and opportunities The physical scenarios evaluate the impact and financial risk relating to several extreme weather hazards, such as extreme heat and cold, heavy snowfall and precipitation, wind gusts, tropical cyclones, coastal flooding/sea level rise and fluvial flooding.

10 Our data sources and assessment methods have been established with input from the renowned Potsdam Institute for Climate Impact Research (PIK).Financial impact modelingClimate VaR provides insights into the potential Climate - stressed market valuation of investment portfolios and downside risks . MSCI ESG Research s financial modeling approach translates Climate -related costs into valuation impacts on companies and their publicly tradable securities. In this way, the Climate VaR framework is designed to help investors to understand the potential Climate -related downside risk and/or upside opportunity in their investment resultsClimateVaRClimatePathwaysBOTTOM UPTOP DOWNT echnologyScenarios2 CAlignmentPolicyScenarios3 C /NDCs4 C /BAU2 CEmissionsScope 3 Scope 2 Scope 1 ExtremeWeatherHazardsCoastalFloodingWild firesExtremeTempera-turesTropicalCyclone sPrecipi-tationWindLatLongSizeSnowfallTR ANSITIONPHYSICALECONOMIC DATACOMPANY DATAR evenuePatentsLocationsEconomicIndicators GDPG